Retirement Planning: When Can I Afford to Stop Working?
A Case Study

Robert was a 54-year-old executive employed as the Chief Information Officer at a publicly held company. He was married, with two children at private four-year colleges, and one in prep school. Robert's compensation package included restricted stock awards and nonqualified stock options. And due to his position with the company, he was enrolled in its supplemental nonqualified executive retirement plan (SERP). He also had the option of deferring compensation.

Needs and Goals
After years of being absorbed with advancing his career and raising his family, Robert was beginning to seriously consider his retirement horizon for the first time. Some of his colleagues had retired already, and others were on the verge. Robert didn't know if he wanted to retire early, but he did want to know if and when he could afford to stop working. He knew there were many factors to consider - financial, tax-related, legal, regulatory, insurance, and investment - that would affect his retirement timing. He had considerable assets at stake, and given his age, there was little recovery time if he made the wrong decisions. Understandably, he wanted guidance on several significant questions:

• Will my assets and balance sheet enable me to retire before I'm 60 with sufficient income to support my lifestyle for the rest of my life?
• Can we afford to buy a condo in our favorite Florida golf community without selling our primary residence in Connecticut?
• When should I exercise my stock options? What are the tax and regulatory implications?
• Should I defer part of my compensation, and if so, for how long?
• How can I limit estate taxes to protect my wife should something happen to me?
• My son wants to teach. Can I provide a safety net for my kids if they don't generate significant income in their careers?

Wealth Management Solutions

• Helped Robert articulate his goals in a meaningful manner, setting a dollar amount and timeframe for each objective.
• Calculated the present value cost of all of those goals.
• Reviewed Robert's balance sheet and computed the tax effect on every asset to determine present value of all resources.
• Confirmed that retirement was possible even now, contingent on recommended strategies to assure cash flow, preservation, and growth.
• Recommended that Robert exercise his stock options with greatest intrinsic value first, and the balance on a programmed basis; and that he exercise and hold incentive options to take advantage of lower capital gains taxes at a future date.
• Recommended using recent cash bonus to reduce mortgage on primary residence, with an eye toward retaining Connecticut home when making the Florida condo purchase in the future.
• Reviewed Robert's total portfolio; reallocated assets based on inherent strengths of different categories, e.g. recommended overweighting his 401K plan to equity mutual funds since the plan calls for distributions beginning at age 70.
• Recommended Robert make annual gifts to his children.
• Recommended converting his term insurance to permanent insurance.
• Recommended that bonuses due to Robert in his remaining working years be deferred, with distributions spread evenly from his retirement to age 70.

Wealth management begins with you. What are your hopes and needs - for yourself, your family, your career, and your community? At Washington Trust, our job is to help you articulate what really matters to you, and then devise a personalized financial plan to align your financial resources to your life goals.

To arrange an appointment at any of our offices or your home or business, please call 800-582-1076 or contact us.